Auto Parts Manufacturers Grab Lifeline

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The Treasury department announced Thursday that it would provide up to $5 billion in financing to prevent a sudden collapse of the auto parts industry. FormTech Industries is one company that hopes to benefit from the relief.


It's MORNING EDITION from NPR News. I'm Steve Inskeep.


And I'm Renee Montagne. Many of the nation's auto suppliers are breathing a little easier this morning. In recent weeks, big parts companies have edged closer to bankruptcy and threatened the broader auto industry. But yesterday the Treasury Department said it would provide up to five billion dollars in financing to prevent a sudden collapse. NPR's Frank Langfitt has been in Detroit this week talking to suppliers. He has this profile of one company that hopes to benefit from the new program.

(Soundbite of factory)

FRANK LANGFITT: I'm standing in Royal Oak, Michigan in a parts factory owned by a company called FormTech. You probably never heard of it, but if you drive a car made in the U.S. there's a good chance one of FormTech's gears is in the transmission. When I visited the company earlier this week, the mood was pretty grim. This is Mike Ryan, FormTech's president.

Mr. MIKE RYAN (FormTech): We're within a day or two at any given time.

LANGFITT: Within a day or two of what?

Mr. RYAN: Of not having cash to make the next payment to the next supplier who comes through the front door. So it's very close now.

LANGFITT: The outlook among workers wasn't much better. This is Steve Cummings(ph). He is a member of United Auto Workers Local 155.

Mr. SPEED CUMMINS (Auto Worker): It's pretty rough. We have about 185 members and we have about 120 working right now, and the future is uncertain. There is just no way of knowing what's going to happen tomorrow.

LANGFITT: FormTech is among 4,000 auto supply companies in the country. Together they employ more than half a million people, far more than the Detroit carmakers. And these days those carmakers aren't ordering many parts from companies like FormTech, and even when they do, they don't pay for at least 45 days. But FormTech still has to cover big expenses while it waits for the money. And week and by week cash drains away. Yesterday, after the government announced it would help suppliers, I went back to FormTech to check in with Mike Ryan.

Hello, Mike.

Mr. RYAN: How are you?

LANGFITT: I'm fine, how are you?

Mr. RYAN: Good.

LANGFITT: Good. Feeling any better today?

Mr. RYAN: A little bit.

LANGFITT: The Treasury Department will guarantee parts suppliers get paid. Suppliers can then use that guarantee to borrow more money to keep operating. Ryan says this will help him borrow a bit more cash, but first he has to qualify for the program. And that, according to Treasury, will be up to General Motors and Chrysler. Ryan says FormTech is critical to the automakers and deserves Federal aid.

Mr. RYAN: Ninety percent of the cars and light trucks in America built by the Big Three have at least one of our parts in them. So with that thought, if we struggle financially then we will certainly affect the industry very quickly.

LANGFITT: Ryan was on the phone yesterday to his congressman. He was trying to learn more about the program and lobby to ensure FormTech makes the cut.

Mr. RYAN: Yeah, I'm in a better mood. I feel a little bit like the guy in the boat that knows he's in the right spot to catch the fish, but I haven't caught the fish yet.

Mr. NEIL DE KOKER (Original Equipment Suppliers Association): We're ecstatic.

LANGFITT: That's Neil De Koker. He runs the Original Equipment Suppliers Association, a big trade group. He was more upbeat. De Koker acknowledged that five billion dollars was nowhere near what the suppliers had asked for. But he said it was progress and would stave off disaster.

Mr. DE KOKER: The supplier industry was approaching collapse and we had not gotten a single ounce of help from government or from any other sources. And this now is turning that around and providing us a lifeline.

LANGFITT: That doesn't mean all suppliers will be spared. The industry had too many companies before the recession and now it will have to shrink dramatically. De Koker expects as many as 200 bankruptcies this year, but he says government aide will allow the industry to consolidate in an orderly way, one that doesn't damage the Detroit Three or the overall economy.

Frank Langfitt, NPR News, Dearborn, Michigan.

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